Friday, October 7, 2016

Lawmaker urges power pricing reform

Lawmaker urges power pricing reform

NOT COMPETITIVE:A DPP legislator said that Taipower’s monopoly in the power market must be redressed by liberalization, necessitating the amendment of the Electricity Act

By Chen Wei-han  /  Staff reporter
The nation’s electricity is not reasonably priced, because Taiwan Power Co (Taipower) monopolizes the market and its pricing mechanism is not transparent, Democratic Progressive Party Legislator Gao Jyh-peng (高志鵬) said yesterday, adding that the electricity market needs to be liberalized.
Gao and National Cheng Kung University law professor Hsu Chung-hsin (許忠信), a member of the Ministry of Economic Affairs’ 18-person electricity pricing review committee, held a news conference to speak about what they say are defects in Taipower’s pricing formula.
Fuel costs and personnel expenses factored into the company’s pricing formula are unverifiable, because there is not a unified basis for comparison of Taipower’s management given its monopoly, Hsu said ahead of a committee meeting today.
The formula excludes the costs of “green” power, and Taipower deducts sales of green electricity from the total cost of power generation, lowering the real cost of power generation, Hsu said.
“The revenue from ‘renewable’ energy should be used to establish a ‘green energy fund’ to promote the use of renewable energy and help the nation go nuclear-free,” Hsu said.
The pricing formula stipulates a profit margin of 5 percent, which is acceptable when Taipower is running at a deficit of nearly NT$100 billion (US$3.15 billion), but the formula allows a fixed profit margin of 3 percent if it overcomes the deficit, Hsu said.
“The fixed profit margin means Taipower does not have to improve its performance to make a profit,” he said. “All it has to do is adjust power rates.”
A large part of pricing depends on fuel price predictions and inaccurate predictions often result in overpricing, so a price stabilization fund was established. However, there is no specific restrictions on the fund’s use, which might act against the pricing formula, he said.
Those factors prevent Taipower from coming up with a reasonable pricing mechanism, with the company still having a major say over electricity rates, Hsu said.
“All these are caused by the company’s monopoly of the power market, which has to be redressed by liberalizing the market,” Gao said.
Gao said he would put forward draft amendments to the Electricity Act (電業法) to liberalize the market, which he said is a part of transitional justice to break away from state-authorized monopolies.
To boost transparency and improvement, accounting separation has to be in place to identify the costs and revenues associated with different departments of the company.
It will be followed by the separation of power generation and power distribution sectors to deregulate the electricity market, he said.
“Transitional justice can boost GDP, as competition ensuing from market deregulation is expected to improve efficiency in the power industry,” Gao said, in response to former premier Simon Chang’s (張善政) remark that transitional justice does not contribute to GDP.

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